10-Q/A 1 form10qa-093002.txt AMENDMENT NO. 1 FORM 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q |X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2002 -------------------------------------------------- OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------------- ---------------------- Commission file number 1-5397 ---------------------------------------------------------- Automatic Data Processing, Inc. (Exact name of registrant as specified in its charter) Delaware 22-1467904 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) One ADP Boulevard, Roseland, New Jersey 07068 (Address of principal executive offices) (Zip Code) (973) 974-5000 (Registrant's telephone number, including area code) N/A (Former name, former address and former fiscal year; if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No CLASS SHARES OUTSTANDING AT SEPTEMBER 30, 2002 ----------------------------------- ---------------------------------------- Common stock, $0.10 par value 598,872,287 AUTOMATIC DATA PROCESSING, INC. TABLE OF CONTENTS PAGE EXPLANATORY NOTE..............................................................2 PART 1 - FINANCIAL INFORMATION Item 1. Financial Statements Statements of Consolidated Earnings Three Months Ended September 30, 2002 and September 30, 2001 (unaudited).........................................3 Consolidated Balance Sheets September 30, 2002 and June 30, 2002 1, 2001 (unaudited).................4 Condensed Statements of Consolidated Cash Flows Three Months Ended September 30, 2002 and September 30, 2001 (unaudited).........................................5 Notes to Condensed Consolidated Financial Statements (unaudited).........6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............................9 PART II - OTHER INFORMATION Item 4. Other Information..............................................13 Item 6. Exhibits and Reports on Form 8-K...............................14 Signatures...................................................................15 Certifications...............................................................16 -1- EXPLANATORY NOTE This amended Quarterly Report on Form 10-Q/A amends and restates in its entirety Automatic Data Processing, Inc.'s October 31, 2002 filing of its Quarterly Report on Form 10-Q for the quarter ended September 30, 2002. Automatic Data Processing, Inc. has filed this amended Quarterly Report on Form 10-Q/A to correct a technical problem with the formatting and subsequent electronic filing of its Quarterly Report on Form 10-Q via EDGAR. -2- PART I. FINANCIAL INFORMATION Statements of Consolidated Earnings (In thousands, except per share amounts) (Unaudited) ------------------------------ Three Months Ended ------------------------------ September 30, September 30, 2002 2001 ------------- ------------- Revenues, other than interest on funds held for clients and PEO revenues $ 1,476,424 $ 1,433,476 Interest on funds held for clients 89,865 113,188 PEO revenues (A) 80,396 61,219 ----------- ----------- Total revenues 1,646,685 1,607,883 ----------- ----------- Operating expenses 708,468 676,352 General, administrative and selling expenses 447,953 456,561 Systems development and programming costs 119,898 115,829 Depreciation and amortization 67,684 69,463 Other income (37,718) (30,522) ----------- ----------- 1,306,285 1,287,683 ----------- ----------- EARNINGS BEFORE INCOME TAXES 340,400 320,200 Provision for income taxes 130,000 123,600 ----------- ----------- NET EARNINGS $ 210,400 $ 196,600 =========== =========== BASIC EARNINGS PER SHARE $ 0.35 $ 0.32 =========== =========== DILUTED EARNINGS PER SHARE $ 0.34 $ 0.31 =========== =========== Dividends per share $ .1150 $ .1025 =========== =========== (A) Net of pass-through costs of $763,379 and $596,462, respectively. See notes to the unaudited consolidated financial statements. -3- Consolidated Balance Sheets (In thousands) (Unaudited) ----------------------------- Three Months Ended ----------------------------- September 30, June 30, 2002 2002 ------------- ------------- Assets ------ Cash and cash equivalents $ 545,779 $ 798,810 Short-term marketable securities 623,988 677,005 Accounts receivable 971,373 1,045,170 Other current assets 360,643 296,272 ----------- ----------- Total current assets 2,501,783 2,817,257 Long-term marketable securities 1,080,894 1,273,768 Long-term receivables 184,717 192,769 Land and buildings 459,763 458,478 Data processing equipment 714,953 696,829 Furniture, leaseholds and other 555,299 540,217 ----------- ----------- 1,730,015 1,695,524 Less accumulated depreciation (1,147,687) (1,099,073) ----------- ----------- Total property, plant and equipment 582,328 596,451 Other assets 338,853 293,808 Goodwill 1,411,449 1,375,654 Other Intangibles 509,061 501,544 ----------- ----------- Total assets before funds held for clients 6,609,085 7,051,251 Funds held for clients 9,086,910 11,225,271 ----------- ----------- Total assets $15,695,995 $18,276,522 =========== =========== Liabilities and Shareholders' Equity ------------------------------------ Accounts payable $ 134,726 $ 148,694 Accrued expenses and other current liabilities 1,024,407 1,035,389 Income taxes 217,422 227,019 ----------- ----------- Total current liabilities 1,376,555 1,411,102 Long-term debt 83,780 90,648 Other liabilities 252,196 233,671 Deferred income taxes 332,647 237,633 Deferred revenue 137,666 138,893 ----------- ----------- Total liabilities before client funds obligations 2,182,844 2,111,947 Client funds obligations 8,764,225 11,050,370 ----------- ----------- Total liabilities 10,947,069 13,162,317 Shareholders' equity: Common stock 63,870 63,870 Capital in excess of par value 310,719 333,371 Retained earnings 6,118,356 5,977,318 Treasury stock (1,736,362) (1,142,041) Accumulated other comprehensive loss (7,657) (118,313) ----------- ----------- Total shareholders' equity 4,748,926 5,114,205 ----------- ----------- Total liabilities and shareholders' equity $15,695,995 $18,276,522 =========== =========== See notes to the unaudited consolidated financial statements. -4- Condensed Statements of Consolidated Cash Flows (In thousands) (Unaudited) -------------------------- Three Months Ended September 30, -------------------------- 2002 2001 ----------- ----------- Cash Flows From Operating Activities: Net earnings $ 210,400 $ 196,600 Expenses not requiring outlay of cash 118,258 95,634 Changes in operating net assets (91,870) 88,609 ----------- ----------- Net cash flows provided by operating activities 236,788 380,843 ----------- ----------- Cash Flows From Investing Activities: Purchase of marketable securities (706,635) (655,514) Proceeds from sale of marketable securities 3,266,384 2,185,166 Net change in client funds obligations (2,286,144) (1,178,214) Capital expenditures (27,208) (32,957) Additions to intangibles (31,333) (22,913) Acquisitions of businesses, net of cash acquired (29,026) (78,936) Other 727 (2,861) ----------- ----------- Net cash flows provided by investing activities 186,765 213,771 ----------- ----------- Cash Flows From Financing Activities: Net proceeds from short-term borrowings 399 86 Payments of debt (396) (563) Proceeds from issuance of common stock 33,093 46,773 Repurchases of common stock (640,318) (437,188) Dividends paid (69,362) (63,971) ----------- ----------- Net cash flows used in financing activities (676,584) (454,863) ----------- ----------- Net change in cash and cash equivalents (253,031) 139,751 Cash and cash equivalents, at beginning of period 798,810 1,275,356 ----------- ----------- Cash and cash equivalents, at end of period $ 545,779 $ 1,415,107 =========== =========== See notes to the unaudited consolidated financial statements. -5- Notes to The Consolidated Financial Statements ---------------------------------------------- (Unaudited) The information furnished herein reflects all adjustments, which are in the opinion of management, necessary for a fair presentation of the results for the interim periods. Adjustments are of a normal recurring nature. These statements should be read in conjunction with the annual financial statements and related notes of Automatic Data Processing, Inc. (ADP or the Company) for the year ended June 30, 2002. Note A - The results of operations for the three months ended September 30, 2002 may not be indicative of the results to be expected for the year ending June 30, 2003. Note B - The calculation of basic and diluted earnings per share (EPS) is as follows: (In thousands, except EPS) --------------------------------------------------------- For the three months ended September 30, --------------------------------------------------------- 2002 2001 --------------------------- --------------------------- Income Shares EPS Income Shares EPS -------- ------- ----- -------- ------- ----- Basic $210,400 606,814 $0.35 $196,600 620,561 $0.32 Effect of zero coupon subordinated notes 313 1,797 476 2,702 Effect of stock options - 3,906 - 9,313 ------------------- ------------------ Diluted $210,713 612,517 $0.34 $197,076 632,576 $0.31 ======== ======= ===== ======== ======= ===== Note C - Other (income)/expense consists of the following: (In thousands) -------------------------------- Three months ended September 30, -------------------------------- 2002 2001 ---- ---- Interest income on corporate funds $(39,704) $(33,545) Realized gains on investments (5,990) (3,994) Interest expense 7,976 7,017 -------- -------- Total other (income)/expense $(37,718) $(30,522) ======== ======== -6- Note D - Comprehensive income for the three months ended September 30, 2002 and 2001 follows: -------------------------------- Three months ended September 30, -------------------------------- 2002 2001 ---- ---- Net income $210,400 $196,600 Other comprehensive income: Foreign currency translation adjustment 8,950 38,402 Unrealized gain on securities 101,705 76,384 -------- -------- Comprehensive income $321,055 $311,386 ======== ======== Note E - Interim financial data by segment: ADP evaluates performance of its business units based on recurring operating results before interest on corporate funds, foreign currency gains and losses and income taxes. Certain revenues and expenses are charged to business units at a standard rate for management and motivation reasons. Other costs are recorded based on management responsibility. As a result, various income and expense items, including certain non-recurring gains and losses, are recorded at the corporate level and certain shared costs are not allocated. Goodwill amortization is charged to business units to act as a surrogate for the cost of capital for acquisitions, which is subsequently eliminated in consolidation. Interest on invested funds held for clients is recorded in Employer Services' revenues at a standard rate of 6%, with the adjustment to actual revenues included in "other". The prior year's business unit revenues and pre-tax earnings have been restated to reflect fiscal 2003 budgeted foreign exchange rates. Results of the Company's major business units, Employer Services, Brokerage Services and Dealer Services are shown below. (In millions) ------------------------------------------------------------------- Three months ended September 30, ------------------------------------------------------------------- Employer Brokerage Dealer Services Services Services Other Total ----------- ---------- ---------- --------- -------------- 2002 2001 2002 2001 2002 2001 2002 2001 2002 2001 ---- ---- ---- ---- ---- ---- --------- ---- ---- Revenues $1,009 $971 $354 $360 $189 $175 $95 $102 $1,647 $1,608 Pretax Earnings $ 240 $215 $ 56 $ 67 $ 29 $ 27 $15 $ 11 $ 340 $ 320 -7- Note F. Intangible Assets Components of intangible assets are as follows: -------------------------------------------------------------------------------- (In thousands) -------------- ----------- September 2002 June 2002 -------------- ----------- Goodwill $ 1,411,449 $ 1,375,654 ----------- ----------- Intangibles Software licenses 486,242 462,474 Customer lists 367,547 360,268 Other 414,731 398,495 ----------- ----------- Total intangibles 1,268,520 1,221,237 ----------- ----------- Total goodwill and intangibles 2,679,969 2,596,891 Less accumulated amortization (759,459) (719,693) ----------- ----------- $ 1,920,510 $ 1,877,198 =========== =========== -------------------------------------------------------------------------------- Other intangibles consist primarily of purchased rights, covenants, and patents (acquired directly or through acquisitions) amortized over periods from 3 to 25 years. Amortization of intangibles totaled $27 million and $26 million for the three months ended September 30, 2002 and 2001, respectively. Changes in goodwill for the quarter ended September 30, 2002 are as follows: (In thousands) -------------------------------------------------------------------------------- Employer Brokerage Dealer Services Services Services Other Total ---------------------------------------------------------- Balance as of June 30, 2002 $751,451 $348,960 $182,642 $92,601 $1,375,654 Additions 3,405 4,692 22,169 - 30,266 Cumulative translation adjustments 4,413 (310) 93 1,333 5,529 Balance as of ---------------------------------------------------------- September 30, 2002 $759,269 $353,342 $204,904 $93,934 $1,411,449 ========================================================== -------------------------------------------------------------------------------- No impairment losses were recognized during the quarter. -8- Note G - In October 2002, the Company entered into a new $4.0 billion unsecured revolving credit agreement with certain financial institutions, replacing an existing $4.0 billion credit agreement. The interest rate applicable to the borrowings is tied to LIBOR or prime rate depending on the notification provided to the syndicated financial institutions prior to borrowing. The Company is also required to pay a facility fee on the credit agreement. The primary uses of the credit facility are to provide liquidity to the unsecured commercial paper program and to fund normal business operations, if necessary. The Company has had no borrowings to date under the credit agreement, which expires in October 2003. Note H - In April 2002, the Company authorized a short-term commercial paper program providing for the issuance of up to $4.0 billion in aggregate maturity value of commercial paper at any given time. The Company's commercial paper program is rated A-1+ by Standard and Poor's and Prime 1 by Moody's. These ratings denote the highest quality investment grade securities. Maturities of commercial paper can range from overnight to 270 days. At September 30, 2002 there was no commercial paper outstanding. For the three months ended September 30, 2002, the Company had average borrowings of $1.3 billion at an effective weighted average interest rate of 1.8%. The Company uses the commercial paper issuances as a primary instrument to meet short-term funding requirements related to client funds obligations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND AND RESULTS OF OPERATIONS Operating Results Revenues and earnings again reached record levels during the quarter ended September 30, 2002. Revenues and revenue growth by ADP's major business units for the three months ended September 30, 2002 and 2001 are shown below: ------------------ ------------------ Revenues Revenue Growth September 30, September 30, ------------------ ------------------ 2002 2001 2002 2001 ---- ---- ---- ---- ($ In millions) Employer Services $1,009 $ 971 4% 9% Brokerage Services 354 360 (2) - Dealer Services 189 175 8 6 Other 95 102 (17) (20) ------ ------ ---- ---- $1,647 $1,608 2% 4% ====== ====== ==== ==== -9- Pre-tax earnings and pre-tax earnings by ADP's major business units for the three months ended September 30, 2002 and 2001 are shown below: ------------------ ----------------------- Pre-tax Earnings Pre-tax Earnings Growth September 30, September 30, ------------------ ----------------------- 2002 2001 2002 2001 ------ ------ ------ ------ ($ In millions) Employer Services $ 240 $ 215 11% 22% Brokerage Services 56 67 (16) 6 Dealer Services 29 27 9 29 Other 15 11 39 (61) ------ ------ ----- ----- $ 340 $ 320 6% 11% ====== ====== ===== ===== Consolidated revenues for the quarter of approximately $1.6 billion were up 2% from last year. Revenue growth in Employer Services grew 4%, while new business sales grew 4% and client retention improved slightly in the quarter. The number of employees on our clients' payrolls declined 2% in the quarter, a slightly lower decline than the full fiscal 2002 average. Brokerage Services revenues declined by 2% due to a number of factors including lost business from industry consolidations, reduced discretionary spending in the financial services industry, compressions of institutional trades and pricing pressure in our back office trade processing business, as well as lower postage revenue and lower growth in the number of equity positions in our investor communications business. Pre-tax earnings in our Brokerage group declined 16% due primarily to declines in our back office trade processing business. Dealer Services revenue growth was 8% supported by acquisitions and increased sales in the traditional core business primarily from our new products, which include Application Service Provider (ASP) managed services and our Customer Relationship Management (CRM)system. Claims Services growth was 3% in the quarter. The primary components of "Other" revenues are Claims Services, foreign exchange differences, and miscellaneous processing services. For the three months ended September 30, 2002 and 2001, Claims Services revenues were $86 million and $84 million, respectively. In addition, "Other" revenues have been adjusted for the difference between actual interest income earned on invested funds held for clients and interest credited to Employer Services at a standard rate of 6%. This adjustment to "Other" revenues resulted in a decrease of $26.8 million and $1.7 million for the three-month period ended September 30, 2002 and 2001, respectively. The prior year's business unit revenues and pre-tax earnings have been restated to reflect fiscal 2003 budgeted foreign exchange rates. Systems development and programming increased in the quarter due to accelerated automation, migration to new computing technologies and the continued development of new and improved products. We believe that sustained investment in systems development and programming is critical to attaining our strategic objectives. Pre-tax earnings for the quarter increased 6% to $340 million from $320 million in the prior year. Consolidated pre-tax margins increased over the previous year as continued automation and operating efficiencies enabled the Company to offset accelerated investments in new products. This increase in pre-tax earnings was offset by lower interest income resulting from the acquisition of ADP common stock for treasury. -10- The effective income tax rate was 38.2% of pre-tax earnings in the current quarter compared to 38.6% in the prior year quarter. The decrease in the effective income tax rate was due to several factors primarily the mix of income between domestic and foreign operations and additional tax credits. Net earnings for the quarter, increased 7% to $210 million from $197 million in the prior year quarter. Diluted earnings per share, on fewer shares outstanding, increased to $0.34 from $0.31. In fiscal 2003, ADP is forecasting another record year of both revenue and earnings per share growth in the mid single-digits over fiscal 2002 full year results. FINANCIAL CONDITION The Company's financial condition and balance sheet remain exceptionally strong. At September 30, 2002, the Company had cash and marketable securities of $2.3 billion. Shareholders' equity was $4.7 billion and the ratio of long-term debt to equity was 2%. Capital expenditures for fiscal 2003 are expected to approximate $160 million, compared to $146 million in fiscal 2002. LIQUIDITY AND CAPITAL RESOURCES Cash flows generated from operations were $236.8 million for the three months ended September 30, 2002 compared to $380.8 million for the three months ended September 30, 2001. The decrease in cash provided from operations was primarily attributable to the pre-funding of employee benefit plans, which impacted the changes in net assets. Cash flows provided by investing activities totaled $186.8 million primarily as a result of proceeds from the sales of marketable securities in our investment portfolio, partially offset by the net change in client funds obligations, acquisitions of businesses, and capital expenditures in the quarter. Cash flows used in financing activities totaled $676.6 million. In the first three months of fiscal 2003, the Company purchased approximately 18.4 million shares of common stock at an average price per share of approximately $35. As of September 30, 2002, the Company has remaining Board of Directors authorization to purchase up to 17.5 million additional shares. Approximately twenty percent of the Company's overall investment portfolio is invested in cash and cash equivalents, which are therefore impacted immediately by changes in interest rates. The other eighty percent of the Company's investment portfolio is invested in fixed-income securities, with varying maturities up to ten years, which are also subject to interest rate risk, including reinvestment risk. The Company has historically had the ability to hold these investments until maturity, and therefore this has not had an adverse impact on income or cash flows. The earnings impact of future interest rate changes is based on many factors, which influence the return on the Company's portfolio. These factors include, among others, the overall portfolio mix between short-term and long-term investments. This mix varies during the year and is impacted by daily interest rate changes. A hypothetical change in interest rates of -11- 25 basis points applied to the average projected investment balances for fiscal 2003 would result in approximately a $9 million pre-tax earnings impact over the twelve-month period. In October 2002, the Company entered into a new $4.0 billion unsecured revolving credit agreement with certain financial institutions, replacing an existing $4.0 billion credit agreement. The interest rate applicable to the borrowings is tied to LIBOR or prime rate depending on the notification provided to the syndicated financial institutions prior to borrowing. The Company is also required to pay a facility fee on the credit agreement. The primary uses of the credit facility are to provide liquidity to the unsecured commercial paper program and to fund normal business operations, if necessary. The Company has had no borrowings to date under the credit agreement, which expires in October 2003. In April 2002, the Company authorized a short-term commercial paper program providing for the issuance of up to $4.0 billion in aggregate maturity value of commercial paper at any given time. The Company's commercial paper program is rated A-1+ by Standard and Poor's and Prime 1 by Moody's. These ratings denote the highest quality investment grade securities. Maturities of commercial paper can range from overnight to 270 days. At September 30, 2002 there was no commercial paper outstanding. For the three months ended September 30, 2002, the Company had average borrowings of $1.3 billion at an effective weighted average interest rate of 1.8%. The Company uses the commercial paper issuances as a primary instrument to meet short-term funding requirements related to client funds obligations. NEW ACCOUNTING PRONOUNCEMENTS In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, "Accounting for Costs Associated with Exit or Disposal Activities" (FAS 146), which nullifies Emerging Issues Task Force Issue No. 94-3 (Issue 94-3), "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." FAS 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. The provisions of FAS 146 are effective for exit or disposal activities that are initiated after December 31, 2002. OTHER MATTERS This report contains "forward-looking statements" based on management's expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ from those expressed. Factors that could cause differences include, but are not limited to: ADP's success in obtaining, retaining and selling additional services to clients; the pricing of products and services; changes in laws regulating payroll taxes and employee benefits; overall economic trends, including interest rate and foreign currency trends; stock market activity; auto sales and related industry changes; employment levels; changes in technology; availability of skilled technical associates and the impact of new acquisitions. ADP disclaims any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. -12- PART II. OTHER INFORMATION Except as noted below, all other items are either inapplicable or would result in negative responses and, therefore, have been omitted. Item 4. Controls and Procedures ADP management, including the Principal Executive Officer and Principal Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based on that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be filed in this quarterly report has been made known to them in a timely fashion. There have been no significant changes in internal controls, or in factors that could significantly affect internal controls, subsequent to the date the Chief Executive Officer and Principal Financial Officer completed their evaluation. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits Exhibit Number Exhibit ------- ------- 99.1 Certification by Arthur F. Weinbach pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 99.2 Certification by Karen E. Dykstra pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K In a Report on Form 8-K dated and filed on September 16, 2002, the Company reported, under Item 9. "Regulation FD Disclosure", the filing with the Securities and Exchange Commission of its Principal Executive Officer's and Principal Financial Officer's Statements Under Oath Regarding Facts and Circumstances Relating to Exchange Act Filings. -13- SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AUTOMATIC DATA PROCESSING, INC. ------------------------------- (Registrant) Date: November 1, 2002 /s/ Karen E. Dykstra --------------------------- Karen E. Dykstra Vice President Finance (Principal Financial Officer) ----------------------------- (Title) -14- CERTIFICATIONS -------------- I, Arthur F. Weinbach, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Automatic Data Processing, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 1, 2002 /s/ Arthur F. Weinbach ----------------------- Arthur F. Weinbach Chief Executive Officer -15- I, Karen E. Dykstra, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Automatic Data Processing, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 1, 2002 /s/ Karen E. Dykstra ------------------------------ Karen E. Dykstra Vice President, Finance (Principal Financial Officer) -16-